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Oil prices are knocking on the door of a major breakout but need some help as banking woes and weak Chinese data seem to be holding us back. Oil came close but failed to close above the 10-day moving average and dipped after it was reported that the Strategic Petroleum Reserve released 2.9 million barrels of oil last week. The market bent after Chinese trade data showed an unexpected decline in imports and slower export growth but held up rather well even as the plague of regional bank failures and rumors kept the market on edge.

The International Monetary Fund’s (IMF) chief economist Pierre-Olivier Gourinchas on Monday said that IMF remains concerned about the global banking sector. He said that despite actions by the US and Swiss authorities to deal with troubled banks “the story is not over”. This comes as US banks tightened lending standards in the first few months this year, and expect this to continue over the rest of 2023, said a Federal Reserve survey released on Monday. That report could lead to a “credit crunch that would suggest that the Fed is done with rate cuts and should be supportive of oil somewhat offsetting some banking worries.

OPEC cuts are not over and in fact, they are just beginning and there are already strong signs that OPEC will comply but will Russia? Bloomberg is reporting that Russia’s “combined volume of crude on vessels heading to China and India plus smaller flows to Turkey and quantities on ships that haven’t yet shown a final destination rose for a fourth week to reach a record 3.55 million barrels a day in the latest four-week period, the highest since Bloomberg began tracking the Russian oil flows in detail at the start of 2022. This report comes after Bloomberg reported a 75% drop-in big oil tanker rates due to the previously announced OPEC plus cuts.

US oil supply, despite the big 2.9 million barrels SPR release, should see more tightening. Refiners have to ramp up to meet demand and that should see a crude draw. We should also see gasoline demand correct last week’s big drop. Distillate demand is also going to rise as the planting of US crops is underway.

Wildfires in Alberta are impacting Canadian oil and natural gas production as wells are getting shut down. Reuters reported that Alberta declared a state of emergency on Saturday in response to wildfires that have displaced nearly 30,000 people and prompted energy producers to shut in at least 280,000 barrels of oil equivalent per day (boepd), more than 3% of Canada’s outpitch Research estimates about ~3 Bcf/d of Alberta natural gas production is shut-in due to wildfire.

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